Understanding Umbrella Insurance

Most of us have insurance for our homes and cars. But did you know that even the most comprehensive policies can leave you exposed to a potentially calamitous lawsuit? That’s why there’s umbrella insurance, a type of coverage that can handle just about everything under the sun. Want more details? Check out our answers to the most common questions people have about the insurance policy of insurance policies.

It is a type of liability coverage that goes above and beyond what you would find in typical home, auto and boat insurance policies. It’s designed to protect you from claims and lawsuits in two ways: by covering things that aren’t included in other policies; and by giving you coverage above the limits in your typical policy.

Like the name suggests, umbrella policies can cover a wide array of potential mishaps. If your dog bites someone in the park, it could cover that. If your neighbor slips on your driveway and dislocates a shoulder, it could cover that. And if you’re liable for a car accident which exceeds the limits of your auto insurance policy, umbrella coverage could kick in to take care of the remainder.

How can the extended coverage limits help me?

Umbrella policies kick in once you’ve reached the maximum payout allowed under your normal home, auto or boat policy. For example, let’s say you crash into another car on the highway, leaving its driver with $500,000 in hospital bills. If your regular auto policy has a $300,000 bodily injury limit, you could be responsible for $200,000. But if you have an umbrella policy, it would spring into action, covering that final $200,000.

Landlords, for one. umbrella policies cover bodily injuries that happen on rental property, e.g. if someone trips on a crack on a building’s front steps. Communications professionals, like journalists, can also benefit from umbrella policies, which cover slander and libel. Even law enforcement officials could get coverage for things like false arrest and malicious prosecution. Check with a GEICO agent to find out how an umbrella policy could work in conjunction with standard malpractice or professional insurance to give you an extra layer of protection.

Does an umbrella policy cover lawsuits? If I have a million dollar umbrella policy, what’s to keep a plaintiff from suing me for two million? If I have a two million policy, why not sue for three million, etc.?

That’s the same question I asked my agent. The chances are most lawyers are looking for the easy way. Once someone is being sued for more than their coverage they will get in the act of defending themselves and fight hard. So just take the minimum 1 million coverage.

The choice of coverage under an umbrella policy should be governed by your net worth, not an arbitrary round number you think someone might sue for. Also, I recommend choosing the next higher limit if your net worth falls between two standard increments of coverage (e.g., if net worth is $2.5 million, choose $3 million in coverage, not $2 million.) Umbralla coverage is not very expensive.